Japan's Economic Indicator
December Trade Statistics

Balance of trade shows positive undertone as commodity prices fall

January 25, 2016

Shunsuke Kobayashi

Summary

◆According to December 2015 trade statistics, export value fell for the third consecutive month by -8.0% y/y, while also falling below market consensus at -7.0% y/y. Export prices declined, especially in the area of petroleum products. Meanwhile, export volume also suffered, with the extent of y/y decline exceeding that of the previous month adding further to the overall sense of weakness in these results. Looking at performance by export goods, household consumer related demand was favorable, supported by financial environments influenced by monetary easing in all regions. Results tended to confirm the structural changes going on in world economies, with materials and capital goods unfavorable due to slow demand in the corporate sector reflecting the low operating rates for industry worldwide and the continuing decline in the price of crude oil.

◆As for the future of exports, the gradual recovery along with some ups and downs is expected to continue. The US economy continues to maintain a firm undertone focusing on the household sector, and promises to bring a continued growth trend in exports of durable goods. As for exports to the EU, the collapse in the price of crude oil and the effects of quantitative easing initiated by the ECB are encouraging a comeback. When all is averaged out, the EU is expected to continue recovering. Meanwhile in Asia, China’s real economy is beginning to show signs of pulling out of the doldrums due to the lowering of its reserve deposit rate and interest rate, and further declines in demand centering on consumer goods will most likely be avoided.

◆The balance of trade was in the black for the first time in two months at 140.2 billion yen. The seasonally adjusted value for the balance of trade also improved due to falling import prices of petroleum products, recording positive figures for the second consecutive month. The trade deficit shrank considerably during calendar year 2015 by a total of 2.8 trillion yen, bringing it closer to the level of 2011 (2.6 trillion yen).